Just did this myself...
In WinUAE I had to choose IDE0 and for HDToolbox for the drive prep, I chose uaehf.device. Then I was able to install the OS in AmigaOS and get it to work in WinUAE.
(I've seen people mention having to use other than IDE0 and/or scsi.device, so I'm not sure it's the same with every setup.)

Just tried the CF card in my A1200 and it worked..
In fact, that's the fastest AmigaOS boot I've ever seen.. :-) WOW!!!

Of course, then I remembered that, being a "clean" install, there's no FAT driver for the PCMCIA card, so I couldn't easily transfer anything..
Hmm.. Should have done that in WinUAE first, while I still had the card the PC.
Oh well, I was thinking of using ClassicWB anyway, and now I know it works..

Apparently, my cheapo IDE-CF adapter is one of the ones that doesn't work with the HD light. I know there's a fix, but I think I'll just get it all set up before I start breaking things..

Also, are there any recommendations for covering the adapter, so it doesn't short out anything? Just place it in a little anti-static plastic or something like that?
I wouldn't think that the adapter would get very hot???